Fleming Corporation, a U Fleming Paid $200,000 Income Tax to Country A

question 44

Multiple Choice

Fleming Corporation, a U.S. multinational, has pretax U.S. source income and foreign source income as follows: $\begin{array}{lr}\text {U.S. source income }&\$1,000,000\\\text {Foreign source income-country A }&500,000\\\text {Total }&\$1,500,000\\\end{array}$
Fleming paid $200,000 income tax to Country A. Assume Fleming's foreign source income does not qualify as foreign-derived intangible income. If Fleming takes the foreign tax credit, compute its worldwide tax burden as a percentage of its pretax income.

• A) 21%
• B) 17.33%
• C) 27.33%
• D) 35%

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Definitions:

Dividend Payable

The amount declared by a company’s board of directors to be distributed among shareholders at a set date in the future.

Residual Dividend Policy

A strategy where dividends are based on the earnings left over after all project capital needs are met.

Debt-Equity Ratio

The ratio that measures the relative proportion of shareholders' equity and debt used to finance a company's assets.

After-Tax Earnings

The amount of net income a firm has after all taxes have been paid, representing the company's profitability.